COVID-19: Bad Loans to Real Estate Rises By 66.5% In 2020

National Bureau of Statistics (NBS) revealed that the total Non-Performing Loans (NPL) recorded by banks for the real estate and construction sectors increased by 66.57% in 2020.

Disclosing this in its selected Banking Sector Data: Sectorial Breakdown of Credit, ePayment Channels and Staff Strength report it said the NPL rose to N226.62 billion in 2020 from N136.05 billion in the same period in 2019.

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According to the report, loans in the real estate sector rose by 12.87% to N56.03 billion at the end of 2020 from N49.65 billion in December 2019, while the NPLs in the construction sector surged by 97.44% to N170.59 billion in December last year from N86.4 billion in 2019.

The construction sector contracted by -7.68% last year, compared to a growth of 1.81% in 2019 and 2.33% in 2018, as the real state sector shrank by -9.22% in 2020, compared to a contraction of -2.36% in 2019 and -4.74% in 2018.

Experts who called on Federal Government to pay attention to the sector blamed the development on the challenges facing the real estate sector on the COVID-19 pandemic.

The Managing Director, Infinity Trust Mortgage Bank Plc, Dr Olabanjo Obaleye, explained that many companies affected by the pandemic had folded up, as housing subscribers were finding it difficult to service their mortgage payment.

He said, “There are two companies that have just collapsed due to the inability of their owners to get foreign exchange for the importation of raw materials.

“On the level of government support on COVID-19, there is nothing visible we have seen.

“We have read so many pronouncements on that from the government but we haven’t got any palliative in that respect. We have made proposals to government through our relevant authority but there is a need for certain funds to be set aside for this.”

A real estate practitioner and also the Vice President, Lagos Chamber of Commerce and Industry, (LCCI) Gbenga Ismail, said: “Now, people won’t be able to pay rents or buy houses as planned. We are not sure of where the monetary issues are going now and not sure if lending will continue in the real estate sector. We are yet to see some of these things going on.”